Stocks Drop on Profit Taking; Dow Off 14.22 : Blue Chip Index Suffers Biggest Loss Since Aug. 6

Selling pressures pushed down stock prices Monday and sent the Dow Jones industrial average on its steepest slide since late summer.

The Dow Jones average of 30 industrials fell 14.22 to 1,457.91 at the close. It was the biggest one-day drop in the blue chip index since Aug. 6, when it slumped 21.73.

But the sell-off came on only moderate volume. Volume on the New York Stock Exchange came to 103.53 million shares, up from 84.06 million shares traded in Friday’s post-holiday session but not strong by recent standards.

Analysts have been expecting that traders would eventually take profits made during the market’s recent advance to record levels.

Routine Profit Taking

“It seems to be mostly routine profit taking following the big run-up we’ve had. You can’t go up every day,” said Eldon Grimm, senior vice president at Birr, Wilson & Co. in New York.

Larry Wachtel, market analyst at Prudential-Bache Securities, said stocks were also hurt by weakness in the bond market.

Bond prices sagged amid uncertainty about the outlook for lower interest rates and a relaxation in the Federal Reserve Board’s monetary policy stance.

Also, the bond market turned pessimistic about the chances for enactment of legislation now pending in Congress to reduce the federal budget deficit. During the session, the Reagan Administration expressed reservations about cuts in defense outlays envisioned in the legislation.

Hopes for lower interest rates, which could lay the basis for better economic conditions and corporate profits next year, had been a key force behind the stock market’s recent march upward.

Leading the list of actively traded issues on the NYSE for most of the afternoon, Baltimore Gas & Electric rose 1/8 to close at 23 1/2.

Baxter Travenol Laboratories, second on the NYSE list of actively traded stocks, was down 3/8 at 14 3/4. The company has been in the process of merging with American Hospital Supply.

Texaco was down 3/4 to 31 3/4. Texaco faces a hearing Thursday on a jury’s $10.53-billion damage verdict against the company. The jury said Texaco improperly broke up Penzoil’s planned acquisition of Getty Oil before acquiring Getty itself.

M-A-Com stayed on the active list the entire session and finished unchanged at 13.

Among airline stocks, Eastern rose 1/8 to 6 1/2 and was also an actively traded issue.

Among the blue chips, International Business Machines fell 1 7/8 to 137 7/8. American Telephone & Telegraph closed at 23 3/8, off 1/8.

United Technologies finished down 3/4 at 41. Machinists struck the company’s Pratt & Whitney Aircraft plants after rejecting a three-year contract offer. It was the first strike against the jet engine manufacturer in 25 years.

Index Falls

In the daily tally on the Big Board, about two issues declined in price for every one that advanced. The exchange’s composite common stock index fell 0.92 to 115.63.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 122.64 million shares.

Large blocks of 10,000 or more shares traded on the NYSE totaled 1,848, compared to 1,662 on Friday.

Standard & Poor’s index of 400 industrials lost 2.11 to 223.10, and S&P;’s 500-stock composite index was down 1.71 at 200.46.

The Wilshire index of 5,000 equities closed at 2,062.876, down 13.842.

The NASDAQ composite index for the over-the-counter market fell 1.00 to 312.95.

At the American Stock Exchange, the market value index closed at 241.37, down 0.89.

Short-Term Bonds Off

In the secondary market for Treasury bonds, prices of short-term governments fell from 1/16 point to 7/32 point and intermediate maturities fell between 11/32 point and 23/32 point. Long-term issues rose from 1/16 point to 3/16 point, according to the investment firm of Salomon Bros.

The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, dipped 0.40 to 108.40. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, dropped 5.67 to 1,136.13.

In corporate trading, industrials dropped 7/8 point and utilities fell 1/2 point. Activity was quiet.

Among tax-exempt municipal bonds, revenue bonds fell 3/4 point in moderate dealings and general obligations dropped 1/2 point, also in moderate activity.